A Review of the Nigerian Energy Industry

Power: MO to checkmate Discos’ poor remittances with TEM

Power transformer16 July 2014, Abuja – The Operator of the Nigerian Electricity Market (ONEM) which is also called the Market Operator (MO) has said the average monthly invoice revenue remittances from privatised electricity distribution companies in Nigeria are still unimpressive.

The acting Director of the MO, Ngozi Osumhor, stated yesterday at a training forum for relevant participants in Nigeria’s Electricity Supply Industry (NESI) that most of the distribution companies were still doing below 50 per cent of their required monthly invoice remittances. Osumbor said this in her opening remarks at the forum in Abuja, adding that a new punitive measure of deducting outstanding balances from new remittances made by distribution companies is being considered so as to checkmate poor revenue remittances with the commencement of the Transitional Electricity Market (TEM) which is a contract-based regime.

She stated that in TEM, distribution companies would not be guaranteed power supply in the event of indebtedness to the market, adding that the market will fully assume all aspects of its contractual character.
Osumbor explained that while a few of the distribution companies are able to do as much as 100 per cent monthly invoiced remittance to the MO, some others are not able to and have been lucky to be assigned a monthly remittance threshold by the Nigerian Electricity Regulatory Commission (NERC).

According to her, the development was irrespective of findings in a study conducted by the MO which it was discovered that most of the distribution companies were capable of doing more than their assigned monthly remittance thresholds.

“We all know that the market performance so far is not impressive. We are doing less than 50 per cent of our total expectation. I want to quickly say that whereas most of the Discos are performing up to 90 per cent, some actually are performing 100 per cent of the amount allocated to them by the Interim Rule (IR).

With that, they are able to collect up to 100 per cent but we have done some studies that show that it is possible that they can do much better than that, but they were just lucky something went in their favour to give them a threshold,” Osumbor said.

She further said: “Now, with the reviewed interim rule, a lot of increase came into play. And I guess every Disco moved up a bit. We were hoping that we are going to record a 100 per cent from those same Discos and others.

“For the Discos, you would notice that we have put sanctions in place, so when you don’t pay based on the total bill we give to you, we first deduct what you are supposed to bring in compulsorily and then we give you a percentage of that as penalty.

“That is on now and we are hoping that will help the Discos to stretch a bit to bring in more money to the market.”

While questioning the poor revenue claims of unruly distribution companies, Osumbor said: “Particularly, Discos that are performing less than 50 per cent, it is really shameful and the truth is that we don’t believe you.

We don’t think that you are doing that badly. Don’t forget that these assets were sold because the notion was that the Discos were not doing well at the time. We got the promise that the Disco owners were coming with a magic wand to improve the network but we have not seen that.”

“All we have seen is that the old Discos arrangement did better than what we have now. Being a past Disco CEO myself, I understand what you should do to rake in more money, particularly now that you have the freedom that we never had,” she added.

While insisting that the NESI was not about to collapse from the pressure of poor remittance and subsequent illiquidity, Osumbor also talked about possible corrective measures to be taken by the MO and other players in the sector.

She said: “We are not barking. It is real. But you see it is a new market and so we are very careful with how far we would want to push the companies. And you know that we are operating an interim market which exercises correction much more than sanction.

Our job is to ensure that we operate in such a manner that everybody is profitable within the rules. We don’t do anything outside the rules. We are not supposed to correct them. What we are supposed to do is to force them to ensure that they perform better.”

“We are not going to teach them how to do it because they are experts. They are still having teething problems. We are hoping that when TEM is declared, then we will hold them responsible fully.

“Because then, the contracts will be activated. Once contracts are activated, you must pay for the energy you take, but now they have not been able to live up to that. We know the market is not doing well, but we have everything in place to ensure that the market does well. And the market is growing because we see light at the end of the tunnel,” Osumbor said.


– This Day

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